Japan parties to clash on taxes in split parliament

TOKYO, Jan 13 (Reuters) - Japan’s ruling and opposition blocs are set to clash over taxes when a divided parliament kicks off a new session this week, as the focus of their battle shifts from security matters to economic issues closer to voters’ hearts.

Media surveys released on Sunday suggested Prime Minister Yasuo Fukuda’s gamble on forcing through a law to restart a naval mission in support of U.S.-led operations in Afghanistan had paid off, leaving his support ratings unscathed, if still fragile.

The ruling coalition on Friday took the rare step of using its two-thirds majority in parliament’s lower house to override a rejection of the bill by the opposition-controlled upper house, a procedure that had been used only once before, in 1951.

But the newspaper surveys also suggested voters might be less forgiving if the same step were taken to override the upper house on budget-related or other bills.

The divided parliament has blocked government policy initiatives since the opposition Democratic Party and its smaller allies trounced the ruling bloc in a July upper house election.

The opposition is now pressing for a lower house poll after the budget is enacted in late March, although no general election need be held until September 2009 and Fukuda is in no rush.

As one core of their next campaign to force a poll, the Democrats are proposing cutting gasoline taxes to help those hit by rocketing oil prices. The government, faced with a huge public debt, wants to maintain the taxes at current levels.

“This is a major theme for forcing a snap election,” Democratic Party Secretary-General Yukio Hatoyama told Fuji TV on Sunday. “It is directly related to the lives of the people and we are resolved not to retreat one step.”

The budget can be enacted without upper house approval but tax laws require approval from both chambers.

Ruling party lawmakers had been wary of using their huge lower house majority to enact the law to resume the mission to refuel U.S. and other ships patrolling the Indian Ocean for suspected terrorists. But Fukuda’s ratings weathered the storm.

A survey by the Nikkei economic daily put support of Fukuda’s cabinet at 42 percent, down just one point from last month, while the liberal Asahi newspaper said its own poll showed 34 percent of voters backed the cabinet, up three points.

But while the Asahi survey showed voters were split evenly over forcing the naval mission bill through, only 18 percent agreed with using the procedure for other laws.

Thirty-five percent were opposed and 44 percent undecided.

Support for Fukuda, 71, was hit late last year by fresh concerns about government mishandling of millions of public pension records, a procurement scandal at the defence ministry, and his tardy response to demands for financial aid for patients who contracted Hepatitis C from tainted blood products years ago.

The pension scandal looks to be a persistent weak spot for Fukuda, one reason he is expected to pledge to try to sort out the mess when a new session of parliament kicks off on Friday. (Editing by Jerry Norton)